Establishing a Per Capita Cap in Medicaid: Implications for California

July 12, 2017

By:
Manatt Health

Note: The Senate released new language for BCRA on July 13. However, it did not make any significant changes to the per capita cap financing methodology proposed in the June 22 version of the bill. Therefore, this analysis remains valid.

Manatt Health estimates the fiscal impact of a per capita cap on Medi-Cal, California’s Medicaid program, based on the Senate’s June 22 Better Care Reconciliation Act (BCRA). Manatt also describes the cap in detail, outlines operational issues and challenges created by the cap, and reviews the choices available to California if the cap is established.

Key findings include:

California can expect to lose $37.6 billion in federal funds between FY 2020 and 2027 under the per capita cap as proposed by the June 22 version of BCRA.

The actual impact will depend on the trend rates for the cap; if they turn out to be even slightly lower than expected, cuts will compound quickly.

A cap locks California into its relatively low Medi-Cal spending levels and puts the state at risk for unexpected health care costs.

A cap would pose major operational issues for California, including the need to make Medi-Cal and budget decisions in advance of knowing the amount of federal funds available to the state.

California will face difficult choices if a cap is imposed; the state will need to raise taxes, cut other programs, significantly reduce Medi-Cal expenditures, or implement some combination of all of these measures.

This analysis does not examine the impact of other BCRA provisions, including changes to the federal match for the state’s expansion population.